What to budget for digital marketing as a D2C brand
How to think about a D2C marketing budget in relation to contribution margin, and why 'percentage of revenue' rules can mask an unprofitable growth channel.
4 min read
Many D2C marketing agencies are judged, and judge themselves, on revenue growth and ROAS alone. Both numbers can look strong while the underlying business loses money on every order. The right questions surface whether an agency actually tracks and optimises for profitability.
Questions worth asking directly
- How do you report contribution margin by channel, not just revenue and ROAS?
- How would you structure Performance Max to avoid overcounting branded search?
- What email flows would you prioritise building first, and why those?
- Can you show a past client's CAC trend over several quarters, not just a single snapshot?
Signs of a good fit
An agency that asks for your product cost, shipping cost and return rate before proposing an ad budget is treating your business as a real P&L, not just a set of ad accounts to optimise blindly toward a vanity metric.
The right D2C agency will ask about your margins before they ask about your ad budget.
What good reporting looks like
Monthly reporting that includes contribution margin by channel, CAC trend, and repeat purchase rate — not just spend, revenue and ROAS in isolation.
The takeaway
Ask any agency how they report contribution margin by channel — an agency that only reports revenue and ROAS is not showing you the full picture.
Written by Fibvo — Bengaluru and Erode, India — working with clients in other time zones. Questions, or think we have it wrong? Tell us.
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